Are Class Action Waivers in Non-Management Employment Arbitration Agreements Enforceable? U.S. Supreme Court to Decide Circuit Split this Fall

The U.S. Supreme Court granted three petitions for certiorari to determine a quickly developing circuit split, but it postponed arguments until its 2017 term, which begins in October. The question before the Court is whether the National Labor Relations Board is correct in its interpretation that class action waiver provisions in certain non-management employment arbitration agreements are illegal under federal labor law. For employers, particularly those with a nationwide workforce, this tool remains one of the few still available to prevent expensive class action litigation from employees.

Since 2011, when the U.S. Supreme Court permitted such waivers in AT&T Mobility LLC v. Concepcion, employers have relied upon them to require that disputes be resolved through individual arbitration. The NLRB over the past few years has issued numerous decisions invalidating arbitration agreements because they contained class and collection action waivers. The Board has stood its ground and routinely stated that such waivers violate employees’ rights under the National Labor Relations Act and are unenforceable.

The U.S. Supreme Court has agreed to hear three cases that should provide for a resolution of the issue. Each involves the question whether the NLRA prohibits employers from requiring the non-management employees covered by the NLRA (employees not defined as “supervisors”) to arbitrate their work-related claims individually rather than as a class. The three cases come from the Fifth, Seventh and Ninth Circuits.

The Fifth Circuit, in Murphy Oil USA, Inc.v. NLRB, overturned the Board’s decision that Murphy Oil had unlawfully required employees at its Alabama facility to sign an arbitration agreement waiving their right to pursue class and collective actions. The Fifth Circuit held that the pro-arbitration policy of the Federal Arbitration Act overrides federal labor law interests and requires enforcement of the class waivers. On the other side of the circuit split, the Seventh and Ninth Circuits have held that corporations cannot require employees to give up their rights to pursue work-related claims on a class-wide basis. The U.S. Supreme Court will review Lewis v. Epic Systems Corp., a case in which the Seventh Circuit held that an arbitration agreement precluding collective arbitration or collective actions violates federal labor law and is unenforceable under the Federal Arbitration Act. The Court also will hear Morris v. Ernst & Young, a decision from the Ninth Circuit invalidating Ernst & Young’s mandatory arbitration agreement because it required employees to bring all claims in arbitration and limited such claims to those brought on an individual basis. These decisions put the Seventh and Ninth Circuit squarely at odds with the Second, Fifth, Eighth and Eleventh Circuit on this issue, with more circuit courts yet to weigh in.

The Fourth Circuit has not addressed this issue yet, although it has held that the availability of class arbitration under the terms of the arbitration agreement is a question for the Court, not the arbitrator, to decide (see Del Webb Communities, Inc. v. Carlson, No. 15-1385 (4th Cir. March 28, 2016)). North Carolina courts have not addressed the NLRA waiver issue, nor are they likely to have the opportunity, although the North Carolina Court of Appeals previously has followed U.S. Supreme Court precedent when holding that contractual waivers of class proceedings in arbitration agreements are permitted in North Carolina (see Torrence v. Nationwide Budget Fin., 232 N.C. App. 307, 753 S.E.2d 802 (2014)).

Visit our Class Actions Brief blog for more information about this case and additional class action and collective action developments throughout the Carolinas. For more information regarding class actions generally and the arbitration agreements in particular, please contact a member of Robinson Bradshaw's Employment and Labor Practice Group.